When the offer on your home is accepted, you’ll start the process of securing the mortgage for your home. Lenders will give you the option to lock or float your mortgage rate prior to closing (which typically happens 30 days after the offer is accepted).
“Locking” your mortgage means that you and your lender have agreed on an interest rate and price for your home loan. Once your loan is locked, that’s the rate and price you get, regardless of what happens in the financial markets. If rates go up, you’re protected; but if rates go down, you won’t benefit either — you close your loan at the rate you’ve locked and you can’t change it. Locks have expiration dates ranging from 30 to 60 days or more, and the longer your lock period, the more it costs. If you don’t close your loan on time, you could end up paying a higher interest rate.
Every day, LendingTree posts our recommendation (below) on whether you should lock or float your rate, so make sure to check back here prior to making your decision.
We are again predicting that mortgage rates might edge up or perhaps hold steady today. However, that forecast is based on early market trends, and those frequently change speed or direction during the day. So a sharper rise or a fall remains possible. Still, if we were currently buying a home, we would lock our rate today. Read on to discover why you might prefer to float.
Our prediction could be undermined in coming hours by any economic, political, and geopolitical news that might affect the American and global economies. The only predictable items on today’s calendar are three auctions by the U.S. Treasury of short-term bills. And those only rarely move markets much. All investors’ eyes remain on Capitol Hill, where a reconciled tax-reform bill is steaming toward a final vote. Successful passage of that this week could see mortgage rates rise, at least moderately. But anything that makes enactment look less likely could see them tumble. Indeed, according to CNBC, this morning’s early rise was likely “boosted by optimism surrounding U.S. tax cuts.”
Average rates for 30-year fixed-rate mortgages inched down on Friday, but only by the smallest measurable amount. That was different from our prediction and was an example of markets changing direction during the day. Still, there has not been a firm trend in those rates over the last four weeks, with alternating periods of mostly modest rises and falls. Indeed, so far this month, they have moved within a very narrow band of 4 basis points – and a basis point is just one-hundredth of 1 percent. So there is still a risk in both floating and locking though recently that has been only a small one. However, that may mean we could soon be due some volatility.
What actually happens next will depend on whether relevant news becomes more or less positive in coming hours and days. Absent other factors, good news tends to push mortgage rates up, while bad news usually pulls them down. Unfortunately, those “other factors” are sometimes present. Nobody can be certain of the future, so you are taking a chance whether you float or lock. Only you can decide on the level of risk with which you are comfortable.
LendingTree makes getting a mortgage easy! Below are the steps to take to make your mortgage process as seamless as possible: